Ann: Investor Presentation, page-8

After 20 years of poor policy and oppressive regulations having all but irradiated South Africa’s junior mining sector, the local junior mining industry is beginning to turn around as a result of the Mining Charter, says minerals explorer Orion Minerals CEO Errol Smart.Serving as Junior Miner Leadership Forum chairperson, Smart tells Mining Weekly that junior mining in South Africa is being resurrected, after years of being relegated to becoming a “bottom feeder of derelict or ageing projects”, with little opportunity for sustainable growth.ADVERTISEMENT“Given the country’s geological endowment and potential, the proportional investment that the industry has seen filtering into junior mining for the past 20 years has been largely underwhelming.”He attributes the slowdown in investment in the junior mining sector to poor policy and regulatory decision-making, which made the South African junior mining space unattractive and less profitable in comparison with other global mining jurisdictions. Smart states that, internationally, junior mining is primarily driven by discovery, innovation and growth to achieve maximum equity returns, which were previously hindered by costly regulatory and policy compliance issues.However, the new Mining Charter – while still having some challenges for old established companies – is extremely well positioned to provide a sound basis for a new breed of junior explorers and developers, he adds.Smart – who will present on the state of junior mining in South Africa at this year’s Investing in African Mining Indaba – exclaims that the local junior mining industry is experiencing renewed interest in exploration in the country’s highly prospective geological environment.He stresses that the “pragmatic approach” of the Department of Mineral Resources (DMR) and Mineral Resources Minister Gwede Mantashe when negotiating the Mining Charter has delivered an investor-friendly charter, which he believes will provide value for prospecting and junior miners.“As a result of the charter, we are likely to see the rebirth of an important sector of the resource industry. For the first time since the Mineral and Petroleum Resources Development Act was first introduced, investors who choose to provide 100% of high risk capital are assured of owning 100% of a prospecting right until a feasible operation has been proven and a mining right is granted,” Smart explains.He states that this framework makes investing in local junior mining projects significantly more attractive for potential foreign investors. This will result in new junior explorers emerging and being well positioned to attract value-additive, broad-based black economic-empowerment (BBBEE) partners, or selling their discoveries to a growing pool of successful BBBEE mining entrepreneurs or empowered South African mining companies.Smart has elected to present at this year’s Indaba to increase global market awareness of the potential that the Mining Charter has created in the country’s junior mining and exploration sectors.“The commercial framework for exploration and junior mining has changed completely in South Africa with the new Mining Charter and many investors have not yet recognised the potential now exposed.”Smart adds that the country needs to alert foreign investors who have a well-developed appetite for exploration, to this potential.This year’s Indaba, which has always been the forum for explorers and junior miners active across Africa to present their projects and attract investors, will, therefore, be an ideal opportunity to attract foreign and local capital on competitive terms amid greater levels of investor surety.However, Smart emphasises that all relevant stakeholders need to continue working on streamlining the regulatory steps to simplify licensing and access to exploration. He states that the Minerals Council South Africa’s Emerging Miners Leadership Forum is actively gathering facts and centralising its lobbying efforts so that it can work with the DMR to further play an enabling role in removing any remaining policy and legislative hurdles.Smart tells Mining Weekly that Orion Minerals will also promote its Prieska zinc/copper project at this year’s Indaba.On December 19 last year, Orion Minerals released a 41-page scoping study on the project that established a robust first phase of production with solid cash flow potential and a payback of three years from initial production.Based on recently updated mineral resources, the scoping study confirms the potential for the Prieska project to become a significant near-term, low-cost zinc and copper concentrate producer.“The study indicates solid operating margins, with the peak funding of A$320-million, inclusive of 20% contingency, recovered within the first third of mine life, all supported by current indicated resources, yielding a net present value of A$420-million,” enthuses Smart.The scoping study has examined extracting only 75% of the total mineral resource at the mean mineral resource grade. This would support a 2.4-million-ton-a-year operation, producing about 70 000 t to 80 000 t of zinc and 22 000 t of copper in concentrates a year.The project is located 270 km from Kimberley, in the Northern Cape. The area is infrastructure-rich, with intact power, roads and water and, based on the orebody and the exploration results being generated, Orion plans to fast-track the development of the mine this year.“This project is paving the way for a broader revival of further exploration of the valuable and geologically rich Areachap belt, which has been underexplored for more than 35 years,” declares Smart.He says the mine will use the latest technology, modern mining methods and exploration technology to identify additional mineral resources.“The application of further modernisation, making optimised use of low-cost available renewable energy, also provides an important cost saving opportunity being investigated in depth by the bankable feasibility study (BFS) which is well advanced,” adds Smart.The BFS is due for completion in the second quarter of this year.Smart concludes that plans are being advanced for a new mine design to feed into the BFS that will provide the technical, operational, social and funding blueprint for a highly mechanised, modern zinc and copper operation, with production being timed to coincide with expected positive developments in the global metals markets.